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Google Faces Wall Street Revolt
Fred Flange wrote to mention a Times of London article, which explains a minor rebellion against GOOG on Wall Street. The company, which has always refused to offer guidance for its stock, is now being peppered with requests to do just that. From the article: "Sergey Brin and Larry Page, Google's founders and biggest shareholders, made plain in their listing prospectus that the company would reject many of the orthodox methods of doing business with Wall Street and instead adopt a mantra to encourage its employees to do good and not 'evil'. Other Wall Street analysts last night were also preparing reports that agreed with RBC, The Times has learnt. 'The time has come for Google to step into line,' one analyst said. 'It is in the interest of all shareholders, including the company's employees and officers, that the share price achieves some stability.'"
Is Google the only company that does not give out this information? How common is this?
I meta-moderate because I care.
If the analysts can't predict, then the stock price would fluctuate.
This introduces uncertainty, and the last thing that Wallstreet likes is uncertainty. Sometimes, companies have their stock prices going up even after they've lost a major deal simply because the period of uncertainty is over.
So, this makes a lot of sense - Google is causing uncertainty in the price, and that is definitely not good for GOOG's shareholders (or for Wallstreet, for that matter).
Their money was good enough for you to take and use; accountability to their requirements is only appropriate.
Yes, but I don't see the investors complaining. The only ones I see complaining are analysts. Do analysts represent the official corporate line of their investors? How many of these analysts actually hold Google stock?
We all know what to do, but we don't know how to get re-elected once we have done it
What bothers me about this is not that Google refuses to provide more earnings guidance, but that the investor are acting like little whiny bitches. Google told Wall Street this is exactly how they would run their company. I have no sympathy for anybody who bought Google stock expecting the company to act like the most other publicly traded company. If they don't like it they can sell the stock. Does everbody allready forget that Google told people not to expect regular earnings guidance BEFORE they went public? I'm not so sure Page and Brin car if the stock deflates all that much. The stock is over valued to begin with. But I guess in the end you can't fault wall street for trying. If they get Google to change they win. However if they don't, and Google holds strong then they just look like fools to me right now.
See, you buy stock in a company hoping that it would not go bust, and that your share's price would increase.
Now, for someone to adequately know whether or not a particular stock is good or bad, they would most certainly need to know what the company has planned, and provide such data. You might argue that a stock-holder knew what s/he was getting into while buying the stock, but not providing enough data defeats the primary purpose that one buys the stock for.
By not providing such information, Google is leaving folks uncertain - now, honestly, if your data was good you'd release it because it would do good to your stock price. If you aren't, I'd be worried about what else is going on, and that is most definitely not a good sign.
Google's prospectus claims that the only reason they do not give quarterly guidance is because it encourages short term thinking - now, the analysts and investors would have no problem with it if Google's annual results were as good as they'd hoped. But it was not, so the analysts are claiming that if they had more information (i.e. the quarterly guidance) then this would not have happened.
Ultimately, the analysts are saying, "By not giving quarterly guidance you are not letting us do our jobs properly." While the long term investors (the kind GOOG wanted in their prospectus) may not need quarterly statements (long term investors can look at annual statements and either dump or buy), however if Google needs to survive in Wall Street, they may need to do both, since not giving quarterly statement introduces a lot of uncertainty.
Ultimately, it depends on how they want to grow. Schmidt has indiciated that they want to be a $100bn company, so for fast growth they may have to disclose such information.
Long term investors are going to be very minimal, and they seldom provide the kind of muscle that Google is looking for.
For their sake, hopefully none. The SEC is really cracking down on analysts who give positive ratings to stocks in which they have a direct interest, i.e. pumping up investment funds their own company sells. The pressure on Google to talk straight with analysts is probably in response to this policy. If the analyst can't make a good judgement and he has some kind of direct interest in that company, he could get into big trouble if he advises the wrong way.
That being said, I also think that Google doesn't have to play ball with these guys if they don't want to, but it might hurt them in the long run. Sure, it's nice public relations and all that, but pissing off the money people is not exactly something you do. Also, it seems like the analysts are whining more than anything. Google may think they're trying to change the way investors and companies interact and they kind of had the ball in their court for a while, but I think the recent fall in price probably are the investors indicating they want straight talk or else. It's russian roulette at $350 a bullet.
You know not of which you speak.
Google's majority shareholders are the founders, effectively they do what they want. The shares they sold have limited voting ability, thus limited ability to direct how the company operates. Investors knew, or should have known, those very important facts before investing.
Wall St. is just very used to getting their way, so when an organization doesn't toe the line they get pissy, as another poster mentioned this is a test of Google's business ethic. Either they'll stick to their guns or fold. IMHO folding will be the first substantive sign that Google as a business is morphing into our next technology monopoly that 15 years from now will be the equilivant of MS now or IBM in the 80s.
l4h
I fully support Google's stance on this issue. Providing guidance is just an invitation to cook the books. What they are asking is to forecast how much money the company is going to make or lose in the next quarter/year. And *then* they are asking the same company to report how close they came to the mark. If the estimate was wrong, the shareholders may have reason to launch a lawsuit.
So what happens? The company does it's best to juggle the numbers so that they match the estimate. This is one of the reasons that accounting practices are as bad as they are -- there is a huge amount of incentive to mislead.
But not only this conflict of interest, what does a company do if they have inside information that will affect their profits in the next quarter? They can't announce the information *and* they can't give accurate numbers (because they can't justify them). So if you are planning a big cash purchase and you know that earnings are going to be low because of it, you are stuck -- you either mislead the analysists or you give them a hint that something big is coming down the pipe. Both are really bad.
But having listened to a number of analyst meetings, I am constantly shocked how clueless these analysts are. They aren't even aware of basic public information that is published in the newspaper. One company I worked for won a large lawsuit (several million dollars) from the federal government a month before the quartly results were released. It was big news in all the papers. At the analyst meeting for the results, the analyst from Merill Lynch asked where the money came from. "The government lawsuit" was the reply. "What government lawsuit?".
A week or so ago I posted hereabouts that it seemed like the analysts on Wall Street were intentionally punishing Google because it wasn't playing ball by giving inside information to analysts for their "projections". I thought it funny that so many news items started to crop up denigrating Google and its projects. Everywhere, even on DL.TV, there was widespread Google-bashing, or at least reporting that people were bashing Google. The stock price keeps plummeting. I speculated that analysts were at least refusing to lend a hand to stop the flood of bad news by speaking up about the company's strengths. Not attacks, just refusal to aid. I thought perhaps that they were passive-agressively sending a message to let them in. They are accustomed to the inside information. They need it to make money on the market consistently, something that normal cowpokes trading online don't do, lacking the information that the analysts hold so closely to themselves.
Damned if the attack hasn't gone full-agressive and public. The message is clear: give us the information we want, or we will do our best to ruin Google. This is extortion.
The analysts need to be regulated again. This is completely out of control.
If you don't like how Google is doing business, don't buy Google. Google fully discloses their corp. philospohy in their prospectus. If you are an analyst, you don't matter because despite what you say they are profitable.
Investing in a profitable company? Horrors, we can't have that. Gives all the crap analysts and brokerage houses are pushing a bad reputation! You need to buy the blue sky buzz word of the month pump-and-dump being touted on TV. Not some innovative company with large sales and a good product line!
I wonder. Google has pissed off DOJ and Wallstreet. It isn't the first time the Wallstreet crowd or the Bushites have played dirty.
In addition, there is a tradition in business of demanding conformity. If you stand out in a corporate culture you are either pecked into conformity or eventually fired for trumped up reasons. Very much like high school in some ways.
It will be interesting to see what happens. As long as they are profitable they do not have to change. Can they last long enough to change Wallstreet? Or are they doomed to cave in?
putting the 'B' in LGBTQ+